Have you been turned down or penalized for a loan due to medical collections or paid collections reporting on your credit report? If so, you may be in for an improved credit score this Fall. FICO® will leave out or discount medical debt from its scores, boosting the credit record of many borrowers, while helping lenders better assess risk.
Contact me today to find out how this update in the near future may benefit you in the Pre Qualification process for the purchase of a home or an existing refinance.
More from the FICO 9 Link
FICO (NYSE:FICO), a leading predictive analytics and decision management software company, announced the new FICO® Score 9 introduces a more nuanced way to assess consumer collection information, bypassing paid collection agency accounts and offering a sophisticated treatment differentiating medical from non-medical collection agency accounts. This will help ensure that medical collections have a lower impact on the score, commensurate with the credit risk they represent. These enhancements help lenders because it leads to a more predictive score. The median FICO®
Score for consumers whose only major negative references are medical collections will increase by 25 points.
FICO® has used sophisticated modeling techniques to make the new FICO® Score 9 more predictive of a consumer’s likelihood to repay a debt than previous versions. This latest version of the FICO® Score, the industry-standard measure of U.S. consumer credit risk, captures recent consumer behavior to give lenders better risk assessments across the credit lifecycle and all credit products. It will be available to lenders through the U.S. credit reporting agencies starting this fall.
FICO Score 9 also supports the desire of lenders to better assess the risk of consumers with limited credit history – so-called thin files. In the model development process, FICO data scientists represented a consumer’s repayment behavior in degrees of risk. For example, instead of classifying a consumer as someone who paid or didn’t pay her bills in absolute terms, the various degrees of the consumer’s payment history have been quantified. The end result is a score with an improved ability to assess the risk of thin files.
“FICO Score 9 uses a more refined treatment of consumers with a limited credit history and those with accounts at collection agencies, so that lenders can grow their credit and loan portfolios more confidently,” said Jim Wehmann, executive vice president for Scores at FICO. “By applying innovative predictive modeling techniques on recent data to capture consumer credit behavior, FICO Score 9 will extend FICO’s leadership in providing the credit score that most accurately and fairly defines U.S. consumer credit risk.”
Craig Turley is a mortgage and finance consultant with Southwest Direct Mortgage in Scottsdale, Arizona. He has 20 years professional business, finance, and management experience as an entrepreneur and corporate executive. Craig is a 1993 graduate of the University of Arizona with a degree in Business Administration, emphasis finance.
